Do Dealers Prefer Cash or Financing for Used Cars?

Posted by Phoebe Lambert on February 7th, 2020

There are many ways through which you can pay to purchase a car. The decision about how you should pay is entirely yours to make as a buyer. It depends on your financial conditions and whether you can pay outright. Can you pay in cash for the vehicle or you are a little short? People pay in cash for new cars but prefer financing while buying used cars.

second hand car finance in UK is quite popular among buyers. But what is the payment method that dealers prefer?

What Do Dealers Prefer?

Well, the preference lies with the preferences of a dealer. Whether they like cash or financing depends on their jobs, sales targets, and profit margins.

A small dealer who is selling £1500 cars would certainly prefer cash. Whereas a salesperson who is employed would definitely prefer financing. The reason behind it is that he/she can get the most profit out of the deal. Salespersons love to get incentives and commissions by selling cars on financing. But they might urge you to pay cash in case they to achieve a sales target.

Benefits of Cash

Cash is a preferable method in case you are making a large purchase. Thus, you can avoid debt and high-interest rates. Here are some benefits of paying in cash for used cars.

Owning the Car

By paying cash, you become the owner from the outset. The vehicle becomes yours and thus you get an asset. There are no strings attached to the deal. Plus, you can sell it if your financial situation varies with time.

No Additional Costs

The one-time payment for the car means you can assess your financial situation. You don’t have to pay a monthly amount with interest. Instead, you can save this amount to purchase a better model or for home renovation. The additional amount that you would pay as interest could be saved.

Full Control

Unlike financing, by paying cash you get full control over the vehicle. You can sell it or change it to get a better vehicle. Also, you wouldn’t have to worry about money deduction for wear and tear. As an owner, you can receive the full value of the car.

Benefits of Cash Financing

You could get a car on financing in different ways. You could buy a car through Personal Loan, Leasing, Hire Purchase, PCP or Credit card. Here are some benefits of financing the used cars.

Spread Cost

You can spread the cost over several months or years through financing. Thus, you can purchase an expensive vehicle and make the payment affordable.

Getting Better Vehicle

Unlike cash, financing allows you to purchase the desired vehicle. You could get that car even if you don’t have the money. A buyer can pay the amount that he/she has and can pay the rest of the cost later.

Using Credit Score

Financing is a great way to use your credit score. You can get a better car with a better finance deal. You can get a lower interest rate if your credit score is good.

Conclusion

A small solo trader or dealer may not care much about the paying method. They know that they will profit from the deal either way. On the contrary, en employed salesman would prefer financing over cash. Financing is a reasonable and better way to purchase used cars.